RADIO'S IMPACT ON PUBLIC SPENDING - David Strömberg
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∗
RADIO’S IMPACT ON PUBLIC SPENDING
David Strömberg
If informed voters receive favorable policies, then the invention of a new mass
medium may affect government policies since it affects who is informed and who is
not. These ideas are developed in a voting model. The model forms the basis for an
empirical investigation of a major New Deal relief program implemented in the middle
of the expansion period of radio. The main empirical finding is that U.S. counties with
many radio listeners received more relief funds. More funds were allocated to poor coun-
ties with high unemployment but, controlling for these and other variables, the effects
of radio are large and highly significant.
Knowledge is power1 .
I. Introduction
Understanding why the political demands of some groups are more easily met
is a key issue in political economy. This paper widens this debate to include
the effects of mass media. There are many reasons why mass media influence
government policy making. One reason, which is central in this paper, is that the
∗
IIES, Stockholm University, S-106 91 Stockholm, email: stromberg@iies.su.se. I thank Gene
Grossman, Torsten Persson, Howard Rosenthal and participants at the CEPR Public Policy
Symposium, George Mason University, Harvard/MIT Seminar on Positive Political Economy,
Princeton University, University of Rochester Wallis Conference, Stanford University, Stock-
holm School of Economics, University of Texas at Austin, University of Toulouse, Trondheim
University, Uppsala University, and the World Bank for comments, and Bobray Bordelon and
Judith Rowe for help in collecting data. Financial support from the Jan Wallander and Tom
Hedelius Foundation is gratefully acknowledged.
1
Francis Bacon, Sacred Meditations, [1597].media provide the bulk of the information people use in elections.2 Further, mass
media are not neutral devices, uniformly distributing information to everyone.
Rather, each of the large mass media creates its specific distribution of informed
and uninformed citizens, partly because of its specific costs and revenue structure.
As a result, in the wake of mass-media technology changes, there are changes in
who has access to political information. If better informed voters receive favorable
policies,3 then policy may also change.
To discuss the media’s effects on policy making in detail, a simple model is
developed. Crucially for a group of voters to defend their political interests, they
must vote and they must know whether their elected representatives have done
something for them. These two aspects are not unrelated, as better informed
citizens are more inclined to vote, and information from the media helps voters
with both. Therefore, it is more costly for politicians to neglect voters with
access to political information via the media. This line of reasoning contains
three testable hypotheses: government spending should be higher on groups where
many have access to the media; it should be higher on groups where more people
vote; and voter turnout should be higher in groups where many have access to the
media.
The next step is to find a suitable data set to test these hypotheses. The
effects of the media on policy are probably most easily measured when new media
technologies are introduced, since these situations create both dramatic changes
in people’s access to mass media and large geographical variations in the share
of households with access to the new media. A few episodes in U.S. history
are exceptional in this regard: the appearance of the penny press 1830-1860,
the introduction of radio 1920-1940, the introduction of TV 1950-1960 and, more
recently, the introduction of cable TV and the internet. The penny press probably
created the most dramatic change, since it was the first real mass media, but the
detailed data necessary for an empirical study is limited for this period. The
introduction of radio also caused major changes in voter access to mass media,
since radio was the first broadcast media with characteristics very different from
print media. The introduction of TV probably had less impact, since it shared
many of the existing media’s characteristics, and because people were already
2
For example, when a survey organization asked a cross section of American voters about
their principal source of information in the 1940 presidential campaign, 52 percent answered
“radio”, and 38 percent “newspapers”(Gallup, 1940).
3
To mention a few, this is argued by Downs [1957] Baron [1994], and Grossman and Helpman
[1996].
1saturated with information from other media.4 This is even more true for media
introduced after TV. For these reasons, this paper will study media effects during
the expansion period of radio. More precisely, radio was introduced as a mass
medium in the early 1920s, and expanded rapidly to reach a household penetration
of around 80 percent by 1940.
Interestingly, this was also an era of rapid changes in economic policy making.
In the middle of the expansion period of radio, the New Deal was launched.
The main empirical question posed in this paper is whether radio influenced the
distribution of funds in one of these early New Deal programs. The program in
question provided unemployment relief and was implemented 1933-1935. It was
the largest of the early New Deal programs and was administered by the Federal
Emergency Relief Administration (FERA).
A cross section of approximately 2500 U.S. counties is used for the study of
FERA expenditures. A different data set, a short panel of counties for the period
1920 − 1940, is used to explore whether the increasing use of radio increased voter
turnout. These county-level investigations are possible thanks to the 1930 and
1940 Censuses which collected county-level data on the share of households with
radios (the share of households in 1920 was virtually zero).
Despite seemingly clear-cut reasons to believe that mass media would influ-
ence government policy making, media influence on government policies has been
a neglected area of research. The issue appears to have fallen in the void between
two academic disciplines. Economists have studied economic aspects of the media
market, while political scientists have mainly been concerned with media’s effect
on voting behavior and public opinion.5 The early empirical investigations of me-
dia effects on policy were mainly case studies of how the publication of particular
news stories affected policy making, and were made by political scientists and
journalists; see Cook et al. [1983] and Protess et al. [1985].
However, subsequent to the first version of this paper, a small economics litera-
ture on the effects of media on government policy making has emerged. Strömberg
[1999, 2003] argues that increasing returns to scale in news production induces a
political bias favoring large groups at the expense of minorities and small orga-
nized interests. That work, as well as the present paper, studies how the media
affect the conflict between voters for government resources.
Besley and Burgess [2002] instead study if the media can discipline politicians
4
Strömberg [2001b] indeed finds that the effects of TV are similar to those of radio found in
this paper, but weaker.
5
The classic study is Lazarsfeld, Berelson and Gaudet [1944].
2to be more responsive to voters’ demands. Since the media help voters infer
how responsive the politicians are, politicians have electoral incentives to be more
responsive in areas where many have access to the media. Using a panel of 16
Indian states, 1958-1992, they find that Indian state governments’ provision of
public food and calamity relief expenditure is more responsive to falls in food
production and crop flood damage in states where newspaper circulation is high.
Shi and Svensson [2002] further investigate whether the access to the media
moderates political business cycles. Such cycles are generated if politicians in-
crease spending just prior to elections in programs directly affecting voters, such
as cash transfers, at the expense of activities only affecting voters with a lag, such
as budget deficits, see Rogoff [1990]. The media may moderate these cycles by in-
forming voters prior to the election about, in this case, the size of budget deficits,
see Strömberg [2001a] and Shi and Svensson [2002]. Using a panel of 123 devel-
oped and developing countries over a 21-year period, Shi and Svensson indeed
find larger political budget cycles in countries where few people have radios.
The effects of voters having access to the media may be very different if gov-
ernments limit press freedom or own the media. Brunetti and Weder [2003] and
Ahrend [2002] find press freedom and corruption to be negatively correlated across
countries. Further, Djankov et al. [2003] find state ownership of the media to be
negatively correlated with a number of measures of good governance in a cross
section of 97 countries. Naturally, press freedom and state media ownership are
not exogenously given. Besley and Prat [2001] argue that a free press is more
likely to emerge in places with many media outlets, where the advertising market
is large, and political rents are small. However, the effect of more media com-
petition is multi-facetted. While Besley and Prat argue that having more media
outlets makes it more difficult for politicians to bribe the media, Mullainathan
and Shleifer [2003] argue that greater competition could induce newspapers to
write stories confirming readers’ prior opinions rather than the facts.
The above literature focusses mainly on the information-providing role of the
media. But the media also affect people in other ways. People learn about political
norms, rules, and values from the media, and the media may even change the way
people interact. For example, Putnam [2000] argues that television made leisure
time more private and reduced social interactions, thereby reducing voter turnout
and social capital.
This paper proceeds as follows. The next section describes the expanding use
of radios in the 1930s and the FERA program. The model is developed in Section
III. Section IV describes the empirical specification and presents the data. The
3empirical results are then presented in Section V. Section VI concludes.
4II. The FERA Program and the Expansion of Radio
The FERA program was implemented in the middle of the expansion period of
radio, an ideal time for this type of study. At the beginning of the FERA program
in 1933, radio was established as an important mass medium. Already in 1930,
NBC Blue had started the first regular — five times a week — 15 minute hard
news broadcast; an initiative soon followed by the other networks. In the 1932
presidential election, the two parties spent nearly $5 million on radio campaigns,
with 25 percent going to national hookups. Radio covered politics both at the
state and the federal level6 . By 1937, 70 percent of the American public reportedly
depended on the radio for their daily news7 . Radio was also considered a credible
media: 88 percent of the American public thought that radio news commentators
made truthful reports8 .
Despite this, in the early 1930s, radio ownership was still very unevenly distrib-
uted across the United States. The share of households in a county with a radio
receiver, rc , ranged from 1 percent to 90 percent, with a mean of 26 percent and
a standard deviation of 18 percent. This exceptional variation in radio use should
make it easier to identify effects of radio use on spending, since the variation in
government spending due to radio effects should also have been exceptionally large
during this period.
As regards the FERA program, radio broadcasts reminded the electorate of the
benefits they had received from the incumbent Governors. For example, Governor
Lehman of New York states in a broadcast on the WOR network, November
3, 1934: “In 1932, I promised that the State under my administration would
recognize that it was its obligation to see that no citizen should be lacking in
food, shelter, or clothing. I am proud of the fulfillment of that promise during
the two years of my administration. Between November 1931 and August, 1934,
we expended $482 000 000 from public funds, Federal, State, and local.” The
address goes on to take credit for projects such as farm-to-market roads and relief
to specific groups, such as home-owners and teachers. Reminding voters of past
political favors was apparently regarded as important and the parties reportedly
produced textbooks containing this information9 . Radio, of course, made this
process more efficient. Radio broadcasts also covered ongoing developments of the
6
For a good discussion of the early history of radio, see Stirling and Kitross [1978].
7
Gallup [1937].
8
Gallup [1939].
9
See the New York Times, November 1, 1934. “Hopkins hits back on relief politics”.
5programs such as the starting of new corporations to administer FERA programs,
and treatment by the State Emergency Relief Administration of county project
applications.
The FERA program was implemented from 1933 to 1935. It was a very large
program, distributing $3.6 billion, which can be compared with total — federal,
state, and local — government expenditures which were around $12 billion at the
time. The program funds were widely distributed, reaching around 16 percent of
all Americans — more than 20 million people — at their peak. At the county level,
total FERA spending per capita, zc , ranged from 4 cents to $226, with a mean of
$20 and a standard deviation of $15.
The purpose of the Federal Emergency Relief Administration was to provide
assistance to all individuals whose income was inadequate to meet their needs.
Unemployment relief was not confined to the those who were completely destitute.
It also included a substantial portion of professional, clerical, skilled, and semi-
skilled workers. About 60 percent of the relief expenditures consisted of cash, while
the rest were given in kind as coupons for food, clothing, or other goods. Some
applicants were required to work in order to receive relief, and 38 percent of the
total relief obligations incurred were work relief. The work relief projects included
work on highways, roads and streets, public buildings, parks, sewage systems,
airports, and benefited the whole community and not just the unemployed.
The FERA was not a federal program, but a state and local program where
the federal government cooperated by making grants-in-aid; see Figure I for an
organization chart. The FERA provided basic rules for eligibility for relief, but
state and local emergency relief administrations made the final decisions on who
would receive relief and how much relief was to be given. Each month, the county
would estimate its total relief needs and request funds from the State Emergency
Relief Administration. The state administration would then review the requests
and determine the allocation to each county. The state relief administration also
received applications for worthwhile projects that might be undertaken by work
relief personnel. Not all relief requests were granted. In Alabama, for example,
it appears that roughly 40 percent of the proposed projects were turned down10 .
Finally, the state administrations applied monthly for funds from the federal ad-
ministration.
Figure I about here
10
Alabama. Relief Administration, “Two Years of Federal Relief in Alabama”, Wetumpka
Printing Company, 1935.
6There were some indications that the FERA funds were used for political
purposes. A local relief chairman reportedly laments when the FERA is cutting
back its activities, “this is likely to hinder my chances for re-election’, since there
would undoubtedly be a feeling of bitterness created on the part of a number of
people whom he might find it necessary to refuse.”11 The model of this paper
will suggest that the chairman would be more reluctant to refuse people who are
likely to vote, and people who are likely to know that he was responsible for their
refusal. Further, the federal administrator Harry L. Hopkins reports “we have
several states where the Governor is acting chairman. I think this business of a
man running for office is something else. We have a fellow managing a campaign
for one man running for office.”12
The model focuses on the Governors as the main source of political influence
on the state-to-county allocation of emergency relief funds. This is consistent with
the standard formal organizational structure of the program, as shown in Figure
I, as well as with contemporary accounts. It is also consistent with the findings of
Arnold [1979] that the executive often has an important impact on the allocation
of newly started programs. It is likely that other actors such as state legislators,
house representatives, and federal administrators also had some influence, but this
paper treats the Governor as being the most important political actor.
The county allocation of FERA funds in the South has been studied by Fleck
[1999]. More recently, Fishback, Kantor, and Wallis [2002] study the national
county-level allocation of FERA spending, as well as the allocation of funds within
other New Deal programs. Their study also summarizes results of other studies
of New Deal programs.
III. Model
A simple model will help structure the empirical analysis. An incumbent
governor in state s allocates the state relief budget, Is , across counties in the
state, subject to the budget constraint
P
(1) c nc zc = Is ,
11
Catherine Dunn, "What price poor relief?" American Public Welfare Association, Chicago,
1936.
12
US Congress. House. Committee on Appropriations. Federal emergency relief and works
program. Hearing before the subcommittee of house committee on appropriations. Seventy-third
Congress, second session. H.R. 7527, 1934. p. 28
7where nc is the population and zc is per capita relief spending in county c. Voters
in county c derive utility uc (zc ) from per capita relief, where
(2) uc (zc ) = k + ac
1−1/α
(zc )1−1/α .
Parameter ac allows relief spending to be more valuable to voters in some counties
than others, while parameter α affects the concavity of the utility function. For
the utility function to be concave, ac > 0 and 0 < α < 1. Besides policy, each voter
i also cares about other characteristics of the governor, captured by parameters
β i and η. The parameter −β i represents an individual’s ideological preference in
favor of the governor and −η represents the governor’s general popularity. The
total utility of voter i, in county c, under the incumbent governor is
(3) uc (zc ) − β i − η.
Information from radio may affect the voter’s decision since only some voters
know that the governor was responsible for the relief allocation. Let the variable
ξ i = 1 if the voter knows that the governor is responsible for the allocation zc , and
ξ i = 0 otherwise. Voter i follows the simple voting rule to cast the ballot for the
incumbent, if the utility under the incumbent has met some minimum standard
ui :
(4) ξ i uc (zc ) − β i − η ≥ ui ;
and otherwise the challenger is voted for.13
III.A. Allocation of Funds to Counties
The governor tries to assess how his probability of winning the election depends
on the allocation of relief expenditures. For each individual i in county c, the
governor assigns a probability tc that the voter will vote, and a probability σ c
that the voter knows that the governor is responsible for the relief program. The
latter probability is increasing in the share of households in the county with a
13
Recent studies of Congressional elections provide some empirical support for this voting
rule. For example, using CPS survey data, Johannes and McAdams [1981] find that people who
remember that their U.S. Representative had done something for them (specifically: brought in
federal grants, projects, revenue sharing, or flood or disaster relief; had kept defense contracts,
had kept jobs, or aided schools, roads or other local projects) were more likely to vote for
the incumbent. Similarly, Stein and Bickers [1994] find that voters who remember that their
Representative has done something for them are more likely to vote for him or her, controlling
for the proportional increase in actual awards to their district. Stein and Bickers also find that
people who were better informed about politics in general were more likely to be informed about
new projects, controlling for actual new awards.
8radio, rc .14 I will assume the functional form σ c (rc ) = σ c (rc )cσr , where cσr and σ c
are positive constants. The governor is also uncertain about the voters’ exogenous
preferences for the challenger β i + ui ; he correctly believes that these are drawn
from a uniform distribution with mean ϕc and density fc . Let vi equal one if voter
i votes for the incumbent, and zero otherwise. Conditional on η, the probability
that vi equals one is
1
(5) 2
+ fc (σ c uc (zc ) − η − ϕc ) .
Since this is true for all voters in county c, it is also the expected share of voters
that will vote for the incumbent. Note that a given swing in popularity, η, or a
given change in utility from the program will produce a larger swing in the share
of voters supporting the governor in counties where the marginal voter density,
fc , is high. The reason is that these counties have many swing voters, that is,
voters who are not strongly ideological. This will be used when measuring the
marginal voter density. Similarly, let τ i equal one if voter i turns out to vote, and
zero otherwise. Then, the probability that τ i equals one is tc .
The incumbent governor wins the election if he gets more than half of all votes
cast:
P 1
P
(6) i τ i vi > 2 i τ i.
This happens with approximate probability15
P
P I [z]h = Pr [ c nc tc fc (σ c uc (zc ) − ϕc − η)]
i >0
(7) 1
P
= H P nc tc fc c nc tc fc (σ c uc (zc ) − ϕc ) ,
c
where H is the cumulative density function of the general popularity shock.
The governor allocates relief spending to maximize his probability of being re-
elected. Given that the solution is interior, the allocation satisfies the budget
constraint and the first-order condition
(8) tc fc σ c u0c (zc ) = λs ,
where λs is a positive constant. Inserting the functional form of the utility function
and taking the logarithm yields
(9) ln zc = αcσr ln (rc ) + α ln σ c + α ln (tc ) + α ln (fc ) + α ln (ac ) − α ln(λs ).
14
Empirical studies have shown that political knowledge is positively related to radio use, see,
for example, Delli Carpini and Keeter [1996, p.144].
15
The approximation disregards idiosyncratic individual-level uncertainty. Given the size of
the state electorates, the approximation error is extremely small.
9The governor allocates more funds to counties with many votes to be gained on the
margin. These are counties where many attribute an increase in relief spending to
the governor (because rc is high or σ c is high), where many vote (tc is high), where
there are many swing voters (fc is high), and where the need for relief spending
is high (ac is high).
The above equation contains two central empirical predictions. First, the
coefficient α on log turnout is positive, so governors should spend more money
per capita in counties where a larger share of the population votes. Second, the
coefficient αcσr on log radio penetration is positive, so that governors should spend
more money in areas where a large share of the population has a radio.
Note that a Benthamite social planner, maximizing the unweighted sum of
utilities, would allocate funds according to equation (9) evaluated at σ c = tc =
fc = 1. Therefore, under the alternative hypothesis that government funds were
allocated by a social planner, the allocation should only depend on ac .
Equation (9) can also be derived in a model where the mechanism of radio
influence is different, see Strömberg [1999, 2003]. In Strömberg [2003], radio
makes voters aware of political campaign promises, and they elect on the basis of
the promises made during the election campaign. The model of that paper is richer
in that the media’s news coverage is endogenous, as are prices for newspapers and
advertisements. Simple versions of both models applied to the allocation of FERA
funds are found in the Strömberg [1999] version of this paper.
IV. Specification and Data
This section discusses the link between the theory and the empirical evidence
and presents the empirical variables.
IV.A. Specification
First, we derive an estimable form of equation (9), determining the allocation
of FERA spending. Suppose that ln σ c , and ln ac , are linear in the variables
contained in vectors xσc and xac , respectively (to be discussed below), so that
(10) ln σ = c0σ xσc + εσ ,
and
(11) ln ac = c0a xac + εa ,
10where cσ and ca are coefficient vectors. Insert the above equations into equation
(9) and re-arrange to get
(12) ln (zc ) = c1 ln (rc ) + c2 ln (tc ) + β 01 xc1 + µs + εc1 ,
where
α ln (fc )
(13) c1 = αcσr , c2 = α, β 1 = cσ , xc1 = xσc .
ca xac
The maintained assumption is that ln rc , ln tc , and the variables in xc1 are un-
correlated with the error term, εc1 , so that the coefficients can be consistently
estimated by OLS. The errors are assumed to be independent across states, but
no restrictions are placed on the within state variance-covariance matrix.
This equation is estimated using a pure cross section of counties, and allowing
for state-specific intercepts, µs . The main hypothesis is that c1 is positive since
having more households with radios has a positive effect (cσr ) on the share of
informed voters, and having more informed voters has a positive effect on FERA
spending (0 < α < 1). The other hypothesis is that turnout is positively correlated
with spending, since c2 = α is positive and smaller than one.
Regarding identification, omitted variables constitute a potential cause for
concern. Counties where many people have radios have observable characteristics
indicating a low need for unemployment relief (low unemployment, high wages,
high bank deposits, high farm-building values), and observable characteristics
indicating high political influence (high voter turnout, low illiteracy rates). If
radio penetration is also correlated with unobserved determinants of need for
relief spending or political influence, then the estimates will be inconsistent. The
sign of the omitted variable bias is not predictable. Unobserved factors related to
a low need for relief create a downward bias in the estimated effect of radios on
spending, while unobserved factors related to political influence create an upward
bias.
A way of dealing with this problem is to find a set of valid instruments, that
is, variables that affect the share of households with radios in the county, but are
uncorrelated with unobservable factors determining the need for relief spending
or political influence.
The instruments I propose are geological features that affect the quality of
radio reception. Most radios in the 1930s were AM receivers. AM waves travel
both through the ground and the air, and the quality of radio reception depends
on both types of transmission. The ability of AM radio waves to travel through
11the ground is measured by ground conductivity, and the first instrument I will use
is ground conductivity in the county seat. Ground conductivity is determined by
the type of terrain. In the United States, it ranges between 0.5 and 30 millimhos
per meter, and a higher ground conductivity indicates better AM propagation
characteristics. Data was provided by the The Federal Communications Com-
mission which uses ground conductivity to predict the propagation of AM signals
across the United States. Second, radio transmission through the air is affected
by physical obstacles. Therefore, I will use the share of the county’s land area
that was woodland in 1930 as a second instrument. The instruments are strongly
correlated with the share of households with radios in the expected way, so they
fulfill the first condition of being correlated with radio penetration. The second
condition, that ground conductivity and the share of woodland are exogenous to
relief spending, seems highly plausible. This is important since it is impossible
to fully test this condition. In the results section, I show some partial tests of it,
namely over-identification tests.
IV.B. Data
The empirical variables used to estimate equation (12) are discussed roughly
in the order in which they appear in Table I. The first column contains the vari-
ables from the theoretical model. The second column contains a sign indicating
whether the relation between the theoretical and the empirical variable is positive
or negative. The exact definitions and sources of the empirical variables are given
in Appendix 1.
Table I about here
The spending data, zc , used in the cross-sectional analysis is cumulative FERA
spending from April 1933 to December 1935, per capita. The share of informed
voters, σ c , is likely to be negatively correlated with illiteracy and positively corre-
lated with school enrollment, in accordance with recent findings that knowledge
about politics is increasing in educational attainment.16 So illiteracy and school
enrollment are the variables collected in xσc of equation (10). The data on the
shares of households with radios, illiteracy and school enrollment are all from
1930.
16
See, for example, Delli Carpini and Keeter [1996].
12Variables tc and fc apply to elections for the office of governor. For each state,
one gubernatorial election was included in the sample. If a state held elections in
1934 (33 states) or 1935 (2 states), then this election was chosen. Otherwise, if the
state had an election in 1936, this election was chosen (11 states). If no election
was held 1934-1936, then the election in 1933 was chosen (1 state). Finally, one
state (Georgia) did not hold gubernatorial elections during the period 1933-1937,
and is excluded from the sample. Below, votes per capita will be called “voter
turnout”, although this term normally denotes average votes per eligible voter.
As a proxy for marginal voter density in county c, fc , I use the standard deviation
of the Democrats’ vote share in all gubernatorial elections 1922-1932 held in the
state to which county c belongs. Presumably, counties where the Democratic
vote share varies more over time contain more swing voters who are not tied down
by ideology but are swayed by, for example, personal popularity to vote for one
candidate or the other.
Next, I describe the large set of empirical variables proxying for parameter
ac , collected in xac of equation (11). Parameter ac measures the value of the
FERA spending for its recipients, and is proportional to the allotment allocated
to the county by a social planner. I take this parameter to correspond to how the
authorities claimed that they were allocating the FERA funds. The federal admin-
istration advised local relief agencies to subtract the income of an applicant from
a minimum subsistence budget to compute the transfer for which each applicant
was eligible.17 The investigation of an application should include a visit to the
home, inquiry as to real property, bank accounts, and other financial resources of
the family, and a determination of the ability and agreements of family, relatives,
friends, churches and other organizations to assist. The estimates of income were
to include wages and other cash income, farm and garden produce, and all other
resources.
To capture real property values, I use data on the median value of owner-
occupied dwelling units and the per capita value of farm buildings. To capture
bank accounts, and other financial resources, I use data on bank deposits. To
capture wages and other cash income, farm and garden produce, I use the average
wage in the retail sector18 and the per capita value of all crops harvested. Since
the ability of friends, family and the community to assist was taken into account,
17
See ’Final Report On the WPA Program, 1935-43’.
18
The simple correlation between the average wage in the retail sector and per capita personal
income at the state level, where income data exists, is 0.8. The reason why the average wage in
manufacturing is not used is that there are many observations missing from this series.
13the error from using county-level aggregates is likely to be diminished. Not only
average income, but also the distribution of income, may be important. Therefore,
the share of the population that was unemployed is included. Apart from the
unemployed, special groups such as ‘the aged, mothers with dependent children,
youths’ are enumerated in the recommendation by the FERA as groups of needy
persons. The share of the population aged over 65, the share of females, and the
share aged below 21, are used for measuring the occurrence of these special groups.
The share of African Americans and the share of immigrants may be correlated
with need aspects not captured by the other variables, and these variables are also
included.
Concerning the minimum subsistence levels, a study by the FERA finds that
“The greatest similarity in major budget group costs, which together constitute
the cost of living as a whole, was found in combined food prices, and the greatest
difference, in rents”.19 The correlation between total costs of living and housing
costs is 0.81. Therefore, I use the median monthly rent to capture variations in
the cost of living.
A number of control variables will be included in the regression. The above
set of variables is substantially larger than that used in earlier studies of the
federal-to-state allocation of New Deal money; see Arrington [1969], Wright [1974],
Anderson and Tollison [1991], and Wallis [1984, 1991, and 1998]. However, two
potentially important variables are not included because county-level data has
not been found: the share of federal land in the state, and the fall in income
1929-1933 (Reading, 1973). Since the federal government had no formal control
over the allocation of FERA grants within the states, it is not clear that the
share of federal land is important in this study. To compensate for the absence of
the fall in income variable, the change in bank deposits 1930-1934 is included in
the regression. Finally, it may be the case that governors spend more money in
counties where they have more supporters. Including share partisans, the share
of voters supporting the winning gubernatorial candidate, makes it possible to
test whether governors were “taking care of their own” in this way; see Dixit and
Londregan [1994] and Cox and McCubbins [1986].
Most of the data is from 1930, and collected in the census of that year. The
exceptions are the political outcome variables, unemployment, which is from both
1930 and 1937, and bank deposits and gasoline sales which are from 1934.
Except for voter turnout and the share of households with radios, theory says
19
Margaret Loomis Stecker, “Intercity differences in costs of living in March 1935, 59 cities”.
US Government Printing Office, 1937.
14nothing about which functional forms should be used in estimating equation (9).
The simplest linear form is chosen. To simplify the interpretation of the coeffi-
cients, all variables in xc1 which are not shares are in logs. Thus, all coefficients
may be interpreted as the percentage response of the dependent variable to a
percentage change in the independent variable.
There are a few further issues concerning the selection of the sample. As
mentioned, there was no contested election in Georgia in the 1930s until 1938.
Therefore, Georgia is excluded from the analysis, which leaves us with 2921 ob-
servations. Second, a number of the series contain missing values, notably gaso-
line spending per capita, crop value per capita, median value of owner occupied
dwelling, and monthly rent. The exclusion of all observations with missing values
leaves us with 2492 observations. The possible selection bias from this narrowing
of the sample is discussed below. Further, in some areas, voter turnout was re-
portedly higher than 100 percent of the population. This was true for St. Louis,
Missouri, in gubernatorial elections, and for St. Louis, Missouri; Loving, Texas;
and Baltimore, Maryland, in presidential elections. These observations have been
omitted, although none of the results presented change when they are included in
the regressions.
Before a more structured investigation of the data, it may be helpful to look
at some simple correlations. A number of key variables indicating high socioe-
conomic status are positively correlated: having many households with radios,
a large share of literate, many employed, high average bank deposits and high
voter turnout. However, these variables are correlated to relief spending in the
FERA program in different ways. Whereas radio use, literacy and voter turnout
are strongly positively correlated with relief spending, with correlation coefficients
around 0.3, employment is negatively correlated (−0.33) with relief spending and
bank deposits are only weakly positively correlated with relief spending.
V. Results
V.A. Baseline results
This section presents the empirical results. Table II presents the OLS estima-
tion of equation (12) determining spending across counties. Column I contains the
baseline case. In column II, a few data series with many missing values have been
omitted. With this smaller set of variables, only 13 percent of the observations are
15omitted due to missing values as compared to 20 percent in the specification of col-
umn I. All regressions include state-specific effects. Further, in all regressions, the
variance-covariance matrix is estimated allowing for arbitrary correlations within
state (clustered by state).
Table II about here
To understand the coefficient signs, it helps to first notice the general pattern.
Factors indicating low socioeconomic status are positively correlated with spending
if they indicate a need for income assistance (high level of unemployment, low bank
deposits, low house values), and negatively related to spending if they indicate low
levels of political participation and information (low voter turnout, high levels of
illiteracy, low radio use).
The main theoretical predictions are that spending should be high where many
households have radios and where voter turnout is high, that is,
(14) c1 > 0, c2 ∈ (0, 1) ,
in equation (12). Turning first to the effect of radio ownership on spending, the
estimate of c1 is positive and significant at the 1 percent level. The estimated effect
of turnout on spending, c2 , falls within the predicted interval and is significant
at the 1 percent level. The estimated effects are economically significant. Since
the variables are in logs, the coefficients measure the elasticity of relief spending
with respect to the share of households with radios and with respect to voter
turnout. The estimates of column I in Table II imply that an increase in the
share of households with radios by 1 percentage point will increase spending by
0.14
0.26
= 0.54 percent, and an increase in voter turnout by one percentage point will
increase spending by 0.17
0.30
= 0.57 percent, evaluated at the means of 0.26 and 0.3
for share of households with radios and voter turnout, respectively.
The other variables related to political knowledge are also correlated with relief
spending in the expected way. Illiteracy is negatively related to FERA spending,
while the school enrollment rate among people aged 7-18 is positively related to
FERA spending.
As concerns the variables related to need, ac , the most important variable
explaining FERA spending is the share of the population that was unemployed
in 1937. Bank deposits per capita are significantly negatively related to FERA
spending, as is the value of farm buildings. Spending is also negatively related
to the share of people aged above 21, and positively correlated with the share of
females in the population.
16As a short side-track, consider the apparent discrimination of African Ameri-
cans in the FERA program. In counties with a large share of African Americans,
income was lower than average, and unemployment (in 1930) was higher than
average. Still, the simple correlation between the share of African Americans and
relief spending is negative (−0.28). The reason is that these counties have charac-
teristics that make them politically weak. First, the illiteracy rate among African
Americans was ten times that among white, US-born, Americans: 16 percent as
compared to 1.6 percent. Second, the voter turnout rate is low; and, third, few
households had radios in counties with many African Americans. Interestingly,
there is no remaining discrimination once illiteracy, voter turnout, and radio use
have been accounted for; see Table II. This suggests that discrimination was me-
diated through poor education, low turnout (partly because of discretionary use
of eligibility rules in the South20 ), and poor access to political news.
V.B. Regressions on subsamples
Next, two auxiliary hypotheses are tested on subsamples: that the political
effects are larger where elections are competitive and that the effects of the radio
are larger in rural ares. The results are displayed in Table II, columns III and IV.
Column III contains observations from states where the gubernatorial elec-
tions were competitive, with a winning margin of less than 30 percent. Some
elections in the full sample are quite non-competitive. For instance, the De-
mocrats dominated the political scene in the South. In most counties in Georgia
and South Carolina, the Democrats got every vote in all elections 1917-1934. In
non-competitive states, allocating the budget in order to win elections was proba-
bly of small importance in comparison to other aspects not treated in this paper.
Therefore, the average partial effect of both the share of households with a radio
and voter turnout on relief spending should be larger when non-competitive states
are excluded. This turns out to be true. In fact, the estimated effects of radio
penetration and voter turnout are about twice as large in the sample of compet-
itive states as in the full sample. The hypotheses that the estimated coefficients
are the same in the competitive and non-competitive states is rejected at the 1
and 5 percent level for radio and voter turnout, respectively.
Contemporary observers argued forcefully that radio improved information
more for rural than urban voters. The reason was that urban voters had better
access to alternative sources of information, such as newspapers, see Brunner
[1935]. As it was relatively inexpensive to deliver radio waves to remote areas,
20
See Ashenfelter and Kelley, [1975].
17the informational advantage of the urban population was diminished by radio. If
the theory of this paper is correct, this should imply larger effects of radio in
rural counties. To test this, a separate regression was run on the subsample of
counties with only rural households, which is displayed in Table II, column IV. The
estimated effect of radio is 46 percent higher in rural areas than in the full sample.
The hypothesis that the estimated effect of radio is the same in rural and non-
rural counties is rejected at the 10 percent significance level. The estimates imply
that radio increased the ability of rural America to attract government transfers.
In quantitative terms, radio penetration going from the sample minimum of 1
percent to the sample mean of 26 percent is estimated to have increased the funds
allocated to a rural county relative to an identical non-rural county by around 50
percent.21
V.C. IV regressions
To explore whether the OLS estimates suffer from an omitted variables bias,
the share of households with radios is instrumented with ground conductivity and
the share of woodland. This bias may arise if radio penetration is correlated with
an unobserved need for relief or political influence. The regressions where radio
penetration is instrumented are presented in Table III, columns I-III. For the full
sample, the IV estimate of the radio’s effect on spending, c1 , is larger than the OLS
estimate, but insignificant. For the subsample of competitive states, the estimated
effect of radio is significant at the 10 percent level, and for the subsample of rural
counties, it is significant at the 5 percent level. The IV estimates of the effect of
radio are larger than the OLS estimates, but only significantly so in the subsample
of rural counties.
Table III about here
The instruments pass standard tests of validity. The F-test for the joint sig-
nificance of the instruments in the first-stage regression is not below 20 in any
of the specifications, so the instruments are not weakly correlated with radio
21
FERA spending in the subsample of rural counties is not significantly correlated with un-
employment in 1930. The reason is that the depression hit the rural areas later. Consequently,
unemployment in rural areas 1933-1935 is probably not well predicted by unemployment in 1930.
18penetration. The overidentifying restrictions all pass at the 10 percent level, us-
ing a J -statistic, consistent in the presence of arbitrary intra-state (intra-cluster)
correlation.
The larger IV estimates of c1 are an indication of a downward asymptotic
bias in the OLS estimates. The bias could be the result of unobserved economic
affluence that is positively related to radio penetration and negatively related to
FERA relief. This effect seems to dominate the possible bias in the opposite
direction, caused by unobserved political strength that is positively correlated
with both radio penetration and FERA relief. However, the evidence of a positive
bias is not overwhelming, and I will use the more conservative OLS estimates in
discussing the effects of radio.
Another concern is that there may be a simultaneity problem if FERA spending
increased voter turnout 1933-1936. This would violate the assumption that ln tc is
uncorrelated with εc1 , and lead to inconsistent estimates. To avoid this potential
problem, voter turnout 1933-1936 is instrumented by voter turnout prior to 1932.
This produces small changes in the estimate of c2 ; see Table III, column IV. A
Hausman test rejects the hypothesis that voter turnout is endogenous to spending.
V.D. Other robustness checks
If radio use is statistically correlated with spending simply because it proxies
for some unobservable characteristic correlated with buying new consumer goods,
car ownership should be expected to behave in a similar fashion as radio ownership.
Gasoline sales per capita is included in the regressions shown in Table II since it
is likely to be correlated with car ownership (for which data was not collected
in the 1930 Census). Gasoline sales per capita is positively correlated with the
same variables as radio penetration: wages, employment, higher farm-building
values, etc. Of all variables, the one showing the strongest simple correlation with
gasoline sales per capita is the share of households with radios. However, gasoline
sales per capita is not significantly correlated with spending.
The results are not sensitive to the effects of small counties or outliers. Limiting
the sample to counties with a population over 5000, or over 10 000, reduces the
sample by 3 and 16 percent, respectively. The estimated coefficient on radio, c1 ,
in the restricted samples is 0.12 and 0.11, respectively, and significant at the 5
percent level. Similarly, if the sample is weighted by the log county population,
the estimate of c1 is 0.13 and significant at the 5 percent level. To explore the
effects of outliers, equation (12) was estimated using a procedure which puts
less weight on observations with large estimated residuals (Stata command rreg).
19This produced estimates of the coefficient c1 that were smaller than the OLS
estimate in the full sample (0.7 as compared to 0.14), similar to the OLS estimate
in the subsample of competitive states, and larger than the OLS estimate in the
subsample of rural counties (0.33 as compared to 0.20). The c1 estimate in the full
sample is significant at the 5 percent level, and the estimates in the subsamples are
significant at the 1 percent level. Estimates using the Least Absolute Deviations
(LAD) estimator, which puts less weight on outliers than OLS since it minimizes
the absolute rather than the squared deviations, produce results similar to the
rreg estimates.
V.E. Radio’s effect on voter turnout
The above estimates of c2 indicate that governors allocated more funds to
areas with a high voter turnout. If radio ownership increases the probability of
turnout, then radio can also affect the allocation of relief spending via turnout.
This subsection investigates whether radio increased voter turnout.
Voter turnout is likely to be increasing in radio penetration since people who
listen to the radio become better informed about politics and therefore also more
likely to vote.22 Perhaps better informed people vote more often because they feel
that they are more likely to make the right choice in case their vote is pivotal;
see Matsusaka [1993], and Feddersen and Pesendorfer [1997]. It could also be the
case that people like to fulfill a perceived “citizen’s duty” (Riker and Ordeshook,
1968) of making an informed choice in the election.
The following specification is used to test whether radio increased turnout,
(15) tct = b1 rct + Xct2 β 2 + µc + µt + εct2 .
This equation is estimated using a panel of counties 1920-1930, including county
fixed effects, election year effects, and a set of exogenous variables. The coeffi-
cient b1 measures the percentage change in votes per capita due to an increase
of one percent in the share of households with radios. We are interested in test-
ing whether this is positive, b1 > 0. If the errors in the equations (12) and (15)
are uncorrelated, then the recursive system may be consistently estimated using
equation by equation OLS.
The dependent variable, tct , is voter turnout in gubernatorial elections. Turnout
in one election around 1920, and one election around 1930 was used. The inde-
pendent variables are taken from the 1920 and 1930 censuses. The closeness of
22
For empirical evidence, see for example Palfrey and Poole [1987] and Delli Carpini and
Keeter [1996]
20the gubernatorial election is included, because a vote is more likely to affect the
outcome, if the election is close (Riker and Ordeshook, 1968). Further, the share
of households with radios is interacted with the closeness of the gubernatorial
election, since radio ownership may make voter turnout more sensitive to the
closeness of the election.
Controls include the share aged above 21, the share of females, the share of
blacks, the share of illiterates, the share of people aged 7-18 that attend school,
the share who are urban, the share of immigrants, log population, the absolute
difference between the vote share of the winner in gubernatorial election and the
vote share of the runner up, and the log crop value per capita. Personal char-
acteristics such as sex, age, race and education have been found to be correlated
with voter turnout; see, for example, Ashenfelter and Kelley [1975], Wolfinger and
Rosenstone [1980], and Teixeira [1992]. Sex and race are also likely to be more
important in the 1930s than in these more recent studies. The extension of the
franchise to women was fairly recent (1920) and, at the time, African Americans
were disenfranchised in the South. Immigration is included because of residence
requirements for voting. The urban share of the population, population density,
and unemployment, are included because they may affect the cost of voting. How-
ever, a number of institutional features which have been found to be important
for voter turnout — poll taxes, literacy tests and registration laws23 — are not in-
cluded. This is because there is little time series variation in these variables. In
the panel study, county dummy variables are included to pick up the effects of
these variables.
The results are shown in Table IV. The estimated effect of the share of house-
holds with radios on voter turnout, b1 , is 0.12, and significant at the 1 percent
level, see column I. An increase in county radio penetration of 10 percent is thus
estimated to increase voter turnout by 1.2 percent.24
Table IV about here
23
See Wolfinger and Rosenstone [1980].
24
Note: the negative coefficient on the interaction term between the share of households with
radios and the vote margin at the state level implies that the effect of the share of households
with radios on voter turnout is smaller than b1 , when the election is not close. However, a
governor who cares about winning the election only cares about how high the turnout is when
the election is close, since only then can a re-allocation of relief funds affect the election outcome.
The effect of radios on voter turnout in this case is b1 .
21As a robustness check, I instrumented radio penetration in 1930, and the
interaction term between radio and closeness of the election, using the same set
of instruments for radio penetration as in Table III. The results are displayed
in Table IV, column II. The IV estimate of b1 is 0.20 and significant at the 10
percent level (p-value .06). The IV estimate of the radio coefficient is larger than
the OLS, but not significantly so. The similar results from estimations with OLS
and IV estimators indicate that there is no serious omitted variable bias. All
time-constant unobserved heterogeneity between counties is controlled for by the
fixed effects, and time-varying unobserved heterogeneity in turnout does not seem
to be correlated with radio use.
We can now determine the estimated effect of radio on spending via voter
turnout. An increase in the share of households with radios by one percent in-
creases turnout by 0.12 percent. Since every percent increase in turnout increases
spending by 0.57 percent, the effect on spending is 0.12*0.57 = 0.07 percent.
Before we close this section, two additional topics merit our attention. First,
the negative coefficient on the interaction term between the share of households
with radios and the vote margin at the state level implies that voter turnout is
more sensitive to the closeness of the election in counties where many people have
radios. One explanation is that people turn out to vote when they think that it
is more likely that their vote will change the outcome of the election. In areas
where many people have radios, a larger share of the voters would know when the
election was going to be close, thus causing the interaction effect. An alternative
explanation is the following. People who know the names and platforms of political
candidates are more likely to vote. Close elections are followed more extensively
in the media. Therefore, more people learn about names and platforms of the
candidates in close elections, which makes a larger number vote. Naturally, this
effect would be larger in areas where more people have radios, thereby creating
the interaction effect.
Second, radio’s estimated total impact on voter turnout in the United States
is huge. In 1920, less than one percent of the population used radios. By 1940,
around 80 percent of households had radios. The estimated average effect of the
share of households with radios on voter turnout during 1920-1940 is 0.07; see
Table IV, column III. (In this specification, the interaction effect between radio
and the closeness of the election has been removed to measure the average effect
across different levels of closeness.) The estimate suggests that the increasing use
of radio led to an increase in votes per capita of around 5.5 percent. Between 1920
and 1940, votes per capita in the United States increased by about 12 percent, from
2225 to 37 percent, in both gubernatorial and presidential elections. According to
the estimates, the increase would only have been about half as large without radio.
The estimates are based on time-series variation using year dummy variables, so
they are not merely picking up the time trend in both series.25
VI. Conclusion and discussion
The mass media affect politics because they carry politically relevant informa-
tion to the voter. This makes media users better at holding politicians account-
able, and more likely to vote. For these reasons, politicians should target voters
using the mass media. The empirical evidence presented in this paper suggests
that such targeting did indeed take place in the United States in the 1930s; gov-
ernors allocated more relief funds to areas where a larger share of the population
had radios. The effects are not only statistically significant, but also economically
important. The estimates of this study imply that for every percentage point
increase in the share of households with radios in a certain county, the governor
would increase per capita relief spending by 0.6 percent. A one standard-deviation
increase in the share of households with radios would increase spending by 9 per-
cent, and a change from the lowest to the mean share of households with radios
in the sample increases spending by 60 percent.
The results are illustrated in Figure II. The total effect of an increase in the
share of households with radios by one percentage point is an increase in state
FERA-spending to the county by 0.61 percent. The lion’s share of this total ef-
fect, 0.54 percent, is due to a direct effect of radio on spending. The remaining
0.07 percent is due to radio increasing voter turnout and voter turnout increas-
ing spending. The numbers in parenthesis are standard errors26 . The results are
25
More generally, the media’s impact on voter turnout is likely to be conditional on media
ownership. Oberholzer Gee and Walfogel [2002] find that changes in the number of black-
owned, black-targeted radio stations (due to local station ownership restrictions being lifted)
significantly affected black voter turnout in the US 1994-1998.
26
The standard error on the effect of voter turnout on government spending is a linear trans-
formation of the estimated standard error of the coefficient estimate of the logarithm of voter
turnout.
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